In The Wealth of Nations, how is Smith both praiseworthy and suspicious of businessmen ability to serve the public good?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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While most people think that Adam Smith’s book, The Wealth of Nations is wholly pro-business, it really is not.  It is in favor of free enterprise and of competition between businesses, but it does not argue that businessmen themselves will want to do what is best for society.

To Smith, businesspeople do benefit society in important ways.  Most importantly, they make society wealthier.  They do this by accumulating capital and putting it to use in the economy.  It is the capital that businesspeople accumulate that allows them to create places of work like the famous pin factory that Smith discusses.  If it were not for businesspeople, this might not be possible.

However, Smith also worries about businesspeople.  He knows that it is good for society when businesses have to compete with one another.  However, he also knows that competition is not really good for business and that businesspeople will try to avoid it when possible.  Therefore, he warns us that businesspeople will always try to collude and to otherwise find ways in which to avoid competition and to increase (or at least maintain) their own profits.  As he says,

People of the same trade seldom meet together,… but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

Thus, businesspeople can be bad for society.  They are good for society in that they bring greater wealth, but they can be bad for society because they will try to do things  that will increase the prices that the public must pay.